Personal Finance, Tax Planning

RMD Rules Have Been Upended. Here’s What You Need to Know.


by Alli Thomas

May 14, 2020

2020 will be a historic year for required minimum distributions (RMDs).

Not only was the RMD starting age requirement pushed back by the SECURE Act, the CARES Act waived RMDs altogether for 2020.


Changes Made by the SECURE Act

Prior to the SECURE Act, anyone with money in a traditional individual retirement account (IRA) or a pretax employer-sponsored retirement plan (such as a 401(k) plan) was required to begin withdrawing a portion of assets from their retirement account no later than April 1 of the year following the year in which they turned 70 ½. Anyone who did not adhere to this had to pay a hefty penalty of 50% of what they should have withdrawn.

The SECURE Act changed the starting age for RMDs to 72, effective for anyone born on or after July 1, 1949. This represents the first age change to RMDs since they went into effect in 1986!


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Changes Made by the CARES Act

As if that weren’t a big enough change to RMD rules, COVID-19 (the coronavirus) came along and shook things up even further. The CARES Act, which was passed in March, waived RMDs totally for this year.

The objective is to allow retirees with retirement savings accounts additional time to make up some investment losses that those accounts may have suffered in the coronavirus-related market downturn.


What if You Already Took Your RMD?

If you took your RMD for 2020 before the CARES Act was passed, you may be able to re-deposit the money via what’s called an indirect rollover. However, this only applies to IRA-to-IRA rollovers, NOT 401(k)-to-IRA rollovers (or vice versa).

But, any RMD taken between February 1, 2020 and May 15, 2020 may be rolled over (or essentially reversed)—as long as the rollover is completed by July 15, 2020. This is thanks to the IRS, which recently issued Notice 2020-23 to provide additional relief to individuals from the impact of the pandemic.

Confused? Not to worry. RMDs and rollovers are both tricky topics, which is why it helps to work with a financial advisor.

If you’d like to have a no-cost, no-obligation consultation with one of our expert advisors, click here to schedule an appointment.

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Alli Thomas

Alli Thomas has worked in the financial services industry for nearly 20 years, with a focus on retirement-related investing. She began her career as a FINRA-licensed participant-services call-center associate at Vanguard, and then moved to Principal Financial Group, where she worked closely with employers, assisting with retirement plan set-up and design, selecting appropriate plan investment offerings, and maximizing employee participation through targeted education campaigns and enrollment meetings. Alli has also worked as a qualified 401(k) administrator and registered investment advisor for several small investment firms. She now writes about all things investment- and finance-related, leveraging her extensive experience and passion for retirement planning to help investors make well-informed financial decisions.

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